Foam Products, Inc., makes foam seat cushions for the automotive and aerospace i

Question

Foam Products, Inc., makes foam seat cushions for the automotive and aerospace industries. The company's activity-based costing system has four activity cost pools, which are listed below along with their activity measures and activity rates: Activity Cost Pool Supporting direct labor Batch processing Order processing Customer service Activity Measure Activity Rate Number of direct labor-hours Number of batches Number of orders Number of customers 10 per direct labor-hour $97 per batch $279 per order s 2,611 per customer The company just completed a single order from Interstate Trucking for 1,900 custom seat cushions. The order was produced in two batches. Each seat cushion required 0.4 direct labor-hours. The selling price was $142.00 per unit, the direct materials cost was $110 per unit, and the direct labor cost was $14.50 per unit. This was Interstate Trucking's only order during the year. Required: Calculate the customer margin on sales to Interstate Trucking for the year. Interstate Trucking Customer Margin-ABC Analysis Costs: Customer margin

Explanation / Answer

                                         Interstate Trucking

                               Customer Margin-ABC Analysis

Sales

$ 269800

Costs:

Direct Material

$ 209000

Direct Labor

27550

Supporting Direct Labor

7600

Batch Processing

194

Order Processing

279

Customer Service Overhead

2611

247234

Customer Margin

$ 22566

Explanation:

Sales (1900 seats × $142 per seat) = $269800

Direct materials ($110 per seat × 1900 seats) = $209000

Direct labor ($14.50 per seat × 1900 seats) = $27550

Supporting direct labor ($10 per DLH × 0.4 DLH per seat × 1900 seats) = $7600

Batch processing ($97 per batch × 2 batches) = $194

Order processing ($279 per order × 1 order) = $279

Customer service overhead ($2611 per customer × 1 customer) = $2611

Sales

$ 269800

Costs:

Direct Material

$ 209000

Direct Labor

27550

Supporting Direct Labor

7600

Batch Processing

194

Order Processing

279

Customer Service Overhead

2611

247234

Customer Margin

$ 22566

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